Effect of the COVID-19 Pandemic on World Trade Networks and Exposure to Shocks: A Cross-Country Examination

ABSTRACT

This study uses trade network analysis and forward shock propagation models to analyze the structure and positioning of international trade networks and their exposure to shocks before and during the COVID-19 pandemic. We include aggregate and sector-wise merchandise exports for the top 20 countries. The results reveal no discernible changes in the overall trade connectivity and intensity. Consumer goods, food and beverages, and industrial supplies indicate a high trade density. However, capital goods, fuels, and lubricants indicate a massive decline. Accordingly, countries should initiate and coordinate timely sector-wise policies to achieve resilience to shocks. Better trade facilitation measures and reduction in trade restrictions are essential.

KEYWORDS:

• COVID-19
• trade network analysis
• forward shock propagation
• trade intensive paths
• capital goods

JEL:

• F1
• F14
• F15
• D22
• L14
• L60

Acknowledgments

This article was presented in the 15th Bulletin of Monetary Economics and Banking (BMEB) International Conference/Webinar on “Stimulating Economic Recovery, Promoting Sustainable-Inclusive Growth: Challenges and Opportunities” held on 2-September 3, 2021. We acknowledge the helpful comments from the editor and two anonymous reviewers. All errors are our own.

Disclosure statement

The authors declare that the research was conducted in the absence of any commercial or financial relationships that could be constructed as a potential conflict of interest.

Notes

1. Trade intensive paths are most active and intense reciprocal trade transaction routes in a network map; see for details Vidya and Taghizadeh-Hesary (2021).

2. Top 20 merchandise export traders for 2019 and 2020 are based on their exporting trade volume in Million US$.

3. As provided in Baldwin and Di Mauro (2020).

4. The methodology is in line with the work of Gephart et al. (2016).

5. As mentioned in the article of Sengupta (2020).